1200.2 - Tax Compliance Policy

Policy Area: Tax Compliance
Policy Sub Area: N/A
Authority: Dr. Linda Combs, State Controller
Effective Date: 3/4/2019
Last Revision Date: N/A
Policy Owner/Division: NCAS

Policy

Agencies are to comply with the Internal Revenue Service (IRS) rules regarding compliance with tax information reporting, “B” notices, backup withholding and making timely deposits with the IRS. This policy outlines responsibilities for the central processor and individual agencies to comply with IRS requirements. The central processing agency, NC Office of the State Controller (OSC), will submit the electronic 1099-MISC file to the IRS and the NC Department of Revenue in a timely manner. Each agency is responsible for filing any amendments related to the original 1099 filing and issuing all related tax deposits. All other tax information reporting is the sole responsibility of each agency. Tax Identification Number (TIN) Matching is an Internal Revenue Service internet-based pre-filing e-service that allows authorized payers the opportunity to match 1099 payee information against IRS records prior to filing information returns. The TIN Matching process compares the information provided on the OSC Substitute W-9, IRS Form W-9 or IRS W-8 type forms (name and TIN) with IRS records. TIN Matching reduces the potential of backup withholding errors, penalty notices and the error rate in TIN validation. Utilizing this service improves the accuracy of the vendor master database. See IRS Publication 1281, Backup Withholding on Missing and Incorrect TIN(s).

Procedures

A. New Vendors/Payees

The North Carolina Accounting System (NCAS) agencies are required to solicit a TIN from the vendors/payees through the OSC Substitute W-9 (“initial solicitation”) or IRS W-8 type form and submit the appropriate tax form through OSC Support Services SharePoint Site (SharePoint). OSC Support Services will validate the legal name to the tax identification number using the IRS TIN Matching system prior to initial activation within NCAS. In the event where the vendor’s legal name and TIN do not match, Support Services will reject the substitute W-9 or W-8 within SharePoint. The rejection messages from SharePoint will serve as a notification for the agency to contact the vendor to acquire a new Substitute W-9 or W-8 form. The vendor will not be added to NCAS until Support Services has successfully matched with the IRS records.

In the event a foreign vendor has not obtained a U.S. TIN, Support Services will assign a predefined vendor number to prevent any duplication within the vendor master file.

B. Annual Check

OSC Support Services will utilize the IRS Bulk TIN Matching Program to proactively attempt to identify mismatches before the IRS notifies the purchasing agency of any mismatches with the IRS CP2100 notice. Agencies should reference IRS Publication 1281 to process the IRS CP2100 notice, if one is received. The bulk TIN matching will be performed during the 4th quarter of the calendar year to prepare for the annual 1099 filing season. OSC may execute the bulk TIN matching more frequently throughout the year, if the need arises. OSC requires a revised tax form (substitute W-9 or W-8 From) for any updates to the vendor detail. Changes should be submitted through SharePoint.

Accounting Guidance

N/A

Revision History